Multiple large shareholders and corporate investment Evidence from China



Abstract:This study investigates the governance role of multiple large shareholders (MLS hereafter) in firms' investment decisions. Using a sample of 1640 Chinese firms listed on the Shanghai or Shenzhen stock markets, we compare the investment efficiency of firms having MLS with that of firms having a single large shareholder and find that the presence and power of MLS are associated with significantly higher investment efficiency. The results are robust after we address endogeneity and sample selection concerns. Further tests show that MLS exert governance mainly through “voice.” MLS tend to lower potential overinvestment and increase future investment performance. The impact of MLS on investment efficiency does not vary with a firm's access to resources and is less prominent in firms with stronger governance and less information asymmetry. Our results imply that MLS play a governance role and alleviate a firm's agency costs and information asymmetry manifested in a firm's investment efficiency.

Keywords:Multiple large shareholders Investment Monitoring

File download:20190414040000285.pdf Downloads:610


RMBS made the Top-50 list of MBA,
EMBA and EE programs——The Financial Times

Renmin University of China

@Business School, Renmin University of China 京ICP备05066828号-1